updated 04:55 pm EDT, Mon May 11, 2009
Microsoft offering bonds
The world's largest software vendor, Microsoft, is selling bonds for the first time as of today. Despite having $25 billion in cash, the company has at least enough demand for $15 billion in bonds, an investor says. According to a Monday WSJ report, the company will sell notes that mature in five, 10 or 30 years. The prospectus says net proceeds from the sale will be used for general corporate purposes such as working capital, capital expenditures and repurchases of capital stock.
"It's a nice diversifier," said Mike Kastner, the head of fixed income at Sterling Stamos Capital Management. "It has a lot of characteristics that people want in their portfolios," he added, calling Microsoft a "super blue chip name."
Price guidance shows the risk premium being offered on the bonds is low, indicating investors are willing to accept less to own the bonds.
People who are in the know about the offering believe the five-year note would have an interest rate around 95 basis points over comparable Treasury yields, while the 10-year and 30-year notes sit at about 105 basis points more than Treasury bonds.
Some believe Microsoft is raising money to exchange Internet search assets with Yahoo, as recently rumored, or buy out SAP to increase its presence in business software.